Student Loans; How banks manage them and how they affect individual Term Paper - 1

Student Loans; How banks manage them and how they affect individual spending - Term Paper Example ay for college education that they cannot afford creates a situation in which a slowed job market will be unable to absorb these individuals and provide the necessary debt payments that these loans necessitate. Accordingly, the rate of default during any future slowdown in economic growth could be so profound that these individuals will contribute to a secondary crisis that could be far worse than the mortgage-backed security crisis that took place during 2007/2008. Yet, rather than focusing an entire analysis upon the potential for hardship that exists due to the way in which student loans are managed and given out, the following analysis will specifically focus upon the way in which banks manage student loans, the potential for distress that this style of management creates, and the individual hardship that student loan/debt repayment creates for a recent graduate and their overall Outlook for earnings during their lifetime. It is the hope of this author that such a level of discus sion will be beneficial with respect to engaging a further level of appreciation with regard to the issue of student loans, how they are managed, and how this form of debt impacts upon individuals within the current era. One of the most interesting ways in which the reader can come to appreciate the similarity between the mortgage-backed securities that contributed to the 2007/2008 financial hardship as compared to the issue of student loan debt creation and repayment has to do with the similarity of financial structure; specifically with regard to the way in which these student loans are packaged in bulk and sold within equity markets. In almost an identical manner to the way in which banks manage mortgage-backed securities and bought and sold these as an asset, the financial system is currently performing much the same process with respect to student loan debt. This is not a new concept. Instead, packaging debt and selling it to investors that place a premium upon whether or not